Optima Ventures LLC and Optima 7171 LLC v United States - ICSID Case No. ARB/21/11 - Notice of Arbitration - 8 February 2021
Country
Year
2021
Summary
This document includes:
Notice of Arbitration
U.S.-Ukraine BIT
Power of attorney issued to Black, Srebnick, Kornspan & Stumpf P.A., Kasowitz Benson & Torres LLP, and Roche Cyrulnik Freedman LLP by Optima Ventures, LLC and Optima 7171, LLC
First declaration of dmytro marchukov prepared at the request of counsel for the claimants 3 february 2021
Criminal Procedure Code (UKR-ENG)
Constitution of Ukraine (Articles 62 and 131-1) (UKR-ENG)
Law on Prosecutor's Office (UKR-ENG)
Civil Procedure Code (Article 262(11))
Commercial Procedure Code of Ukraine
Civil Code of Ukraine (Article 1224)
Order No. 490_11934_15
Nikopol Decision
Nikopol Decision (Srebnick, Howard)
NOTICE OF ARBITRATION
TABLE OF CONTENTS
I. INTRODUCTION AND FACTUAL BACKGROUND
II. PARTIES
III. JURISDICTION
A. Claimants' Investment in Commercial Real Estate in Texas Constitutes an Investment under the U.S. Ukraine-BIT
B. Under the U.S.-Ukraine BIT, the CompuCom Campus is Owned and Controlled by Ukrainian Nationals
IV. THE UNITED STATES BREACHED ITS OBLIGATIONS UNDER THE U.S.- UKRAINE BIT
A. The U.S.-Ukraine BIT Prohibits Unlawful Expropriation
B. The U.S.-Ukraine BIT Requires Fair and Equitable Treatment
C. The U.S.-Ukraine BIT Provides Exceptions Only For "Measures Necessary for the Maintenance of Public Order," "International Peace or Security," or "Essential Security Interests"
D. The U.S.-Ukraine BIT Reserves Full Protections of Domestic Law and International Legal Obligations
E. The United States Violated Customary International Law and the Requirement of Fair and Equitable Treatment
F. In Addition to Violating Customary International Law's Minimum Standards, The United States is Violating Its Own Doctrine of "Prescriptive Comity"
G. The United States Is Further Violating Its Own Doctrine of "Adjudicatory Comity"
H. The United States Has Unlawfully Expropriated Ukrainian Investments
I. United States Civil Forfeiture Law Fails to Provide Due Process
J. The United States is Wrong on the Merits
V. DAMAGES
A. Customary International Law Requires Full Reparation For Damages Resulting From The Breach Of An International Obligation
B. Claimants' Initial Assessment of Damages
C. Claimants are Entitled to Arbitration Costs and Expenses
VI. AGREEMENT TO ARBITRATE
VII. REQUIRED COPIES AND LODGING FEE
VIII. THE CLAIMANTS' REQUEST FOR RELIEF
I. INTRODUCTION AND FACTUAL BACKGROUND
A. The United States' Forfeiture Actions
Optima Ventures, LLC ("Optima Ventures" or "Claimant") and Optima 7171, LLC ("Optima 7171" or "Claimant") (collectively "Claimants") request the institution of arbitration proceedings against the United States of America (the "United States" or "U.S.") under the Convention on the Settlement of Investment Disputes (the "ICSID Convention") and the ICSID Rules of Procedure for Arbitration Proceedings ("ICSID Arbitration Rules").
This Notice of Arbitration (the "Notice") is submitted pursuant to Article VI of the Treaty Between the United States of America and Ukraine Concerning the Encouragement and Reciprocal Protection of Investment (the "U.S.-Ukraine BIT"),1 which was signed on March 4, 1994 and entered into force on November 16, 1996.2
The United States of America (the "United States" or "U.S.") has engaged in expropriation and breaches of the obligation of fair and equitable treatment with respect to Ukrainian nationals Ihor Kolomoisky and Gennadiy Boholiubov's investments in commercial real estate in Dallas, Texas. Specifically, on August 6, 2020, the United States, acting through the United States Department of Justice, filed a complaint for civil forfeiture in the Southern District of Florida, which sought to forfeit ownership of a roughly 19.5-acre office park located in Dallas, Texas, comprising three buildings, parking areas, and undeveloped land known as the CompuCom Campus (hereinafter the "CompuCom Campus").3 On September 4, 2020, without a hearing or any opportunity to respond, the United States moved for and obtained an Ex Parte Restraining Order, which prohibited the property from being "transferred, sold, assigned, pledged, distributed, encumbered, attached or disposed of in any manner. . . unless approved in writing by the Government."4 Subsequently, the United States conditioned the sale of the property upon the deposit of the net sale proceeds into the account of the United States Marshals Service. The market value of the CompuCom Campus is $23,250,000.00. To date, there has been no hearing or opportunity to challenge the basis for the Ex Parte Restraining Order.
B. Ukrainian Nationals' Investments in CompuCom and PNC Plaza Kolomoisky and Boholiubov are well-known Ukrainian business magnates.
Until December 2016, Kolomoisky and Boholiubov owned and controlled PrivatBank, the largest commercial bank in Ukraine. Kolomoisky and Boholiubov also held large ownership interests in a number of industries, including holdings in the oil and gas and ferroalloy industries.
Beginning in or around the year 2008, Kolomoisky and Boholiubov began investing in the United States alongside their partners, Mordechai Korf and Uriel Laber. Kolomoisky and Boholiubov had previously transacted business in Ukraine with United States citizens Korf and Laber. As part of their longstanding business relationship, Kolomoisky and Boholiubov and Korf and Laber decided to engage in transactions in the United States, and negotiated an agreement whereby Korf and Laber obtained a 33.33% interest (16.665% Laber, 16.665% Korf) in certain investments in the United States, with Kolomoisky and Boholiubov owning the remaining 66.67% (33.335% Kolomoisky, 33.335% Boholiubov).
Kolomoisky and Boholiubov invested in the United States through Optima Ventures, a Delaware limited liability company. The ultimate beneficial ownership of Optima Ventures is as set forth above: 16.665% Laber; 16.665% Korf; 33.335% Kolomoisky; 33.335% Boholiubov. Although Korf and Laber oversee the day-to- day operation of the investments in the United States, Kolomoisky and Boholiubov facilitated the investment of the capital and hold a 66.67% interest, including voting interest. Kolomoisky and Boholiubov can dissolve Optima Ventures by supermajority vote as well as remove Korf as manager for cause. Optima Ventures and Optima 7171 have duly authorized the submission of these claims to arbitration pursuant to Article VI of the U.S.-Ukraine BIT.5
In 2010, Kolomoisky and Boholiubov provided capital for the purchase of the CompuCom Campus in Dallas, Texas. The CompuCom Campus is owned by Claimant Optima 7171, a Delaware single purpose limited liability company whose sole purpose is ownership of the CompuCom Campus. Optima 7171 is a wholly owned subsidiary of Optima Ventures. Optima 7171's profits and losses from the CompuCom Campus are allocated to Optima Ventures, and Optima Ventures controls and directs the distribution of funds derived from the CompuCom Campus.
The CompuCom Campus is currently owned free and clear of any encumbrances and its current market value is $23,250,000.00.
C. The Nationalization of PrivatBank
In 2014, following the invasion of Ukraine by Russia, Kolomoisky entered Ukrainian politics. In 2014, Kolomoisky was appointed Governor of Dnipropetrovsk Oblast. Eventually, as has been widely reported in the international press, Kolomoisky and the former President of Ukraine, Petro Poroshenko, had a falling out. On March 25, 2015, Poroshenko signed a decree dismissing Kolomoisky from his position as Governor of Dnipropetrovsk Oblast. In December 2016, at a time when Poroshenko was still in power, Kolomoisky and Boholiubov's ownership of PrivatBank was nationalized by the Ukrainian government. At least one Ukrainian court has held that the nationalization of PrivatBank was illegal.
According to the United States, Kolomoisky and Boholiubov "used their control of PrivatBank to steal billions of dollars of the bank's funds" and PrivatBank had to be "bail[ed] out" with "$5.5 billion in order to stave off economic crisis for the whole country." The United States alleges that "Kolomoisky and Boholiubov's conduct violated numerous provisions of the Ukrainian Criminal Code." Indeed, the lynchpin of each and every allegation of wrongdoing set forth in the United States' Verified Complaint ("Compl.") is purported wrongdoing that occurred in Ukraine, at the direction of two Ukrainian nationals who reside in Ukraine, and to the detriment of a Ukrainian bank located in Ukraine. Nevertheless, to date, the Ukrainian Prosecutor's Office has made no criminal allegations against Kolomoisky or Boholiubov, neither of whom have been charged with any crimes in Ukraine.
Kolomoisky, in fact, continues to reside in Ukraine, where he remains one of the country's foremost business magnates. At risk of repetition, although the United States claims it is entitled to expropriate investments based on claims that Kolomoisky and Boholiubov caused "$5.5 billion" in losses to the Ukrainian government and a potential "economic crisis for the whole country," purportedly constituting violation of "numerous provisions of the Ukrainian Criminal Code,"
Ukraine itself has not brought any criminal charges against Kolomoisky and Boholiubov, and the propriety of the nationalization of PrivatBank continues to be litigated to this day.
Article 62 of the Ukrainian Constitution provides that "a person shall be deemed innocent of committing a crime and shall not be subjected to a criminal punishment unless his/her guilt has been proven through a legal procedure and established by a court verdict of guilty." Marchukov Aff. ¶ 14 (attached as Exhibit 4). The Ukrainian Constitution further provides the Ukrainian Prosecutor's Office is exclusively empowered to initiate criminal charges. Id. ¶ 17. Ukrainian civil and commercial courts therefore uniformly hold that they lack authority to conclude or find that conduct violates the Criminal Code of Ukraine in the absence of criminal charges filed by the Ukrainian Prosecutor's Office and a finding of violations of the Criminal Code of the Ukraine by a Ukrainian criminal court. Id. ¶ 25.
D. Parallel Ukrainian Proceedings
Recently, certain of the Ukrainian borrowers accused by the United States of committing Ukrainian crimes -- in Ukraine, against a Ukrainian bank -- have initiated litigations in Ukraine against PrivatBank seeking judgments that, contrary to PrivatBank's allegations in its various litigations (and the United States' allegations here), the purportedly fraudulent loans were in fact entirely legitimate and consistent with Ukrainian law (the "Related Actions"). See generally Decision, Joint Stock Co. Nikopol Ferroalloy Plant v. Joint Stock Co. Comm. Bank PrivatBank, No. 910/13313/20 (Kyiv. Econ. Ct. Jan. 22, 2021); Decision, Joint Stock Co. Nikopol Ferroalloy Plant v. Joint Stock Co. Comm. Bank PrivatBank, No. 910/14224/20 (Kyiv. Econ. Ct. Jan. 22, 2021) (hereinafter "NZF Decision"). Those cases are proceeding through the Ukrainian judicial system, and Ukrainian courts are now issuing decisions directly refuting PrivatBank's allegations - allegations that the United States has parroted in the Complaint. See id.
As a specific example, the United States alleges that application for Loan Number 4N09129D falsely "stated that the loan would be repaid via funds earned through ferroalloy production; instead, it was repaid with funds from two other loans." Compl. ¶ 47. The United States claims that such alleged misrepresentations "constituted a fraud by and on PrivatBank." Id. ¶ 48. However, in a decision issued by the Economic Court of Kyiv on January 22, 2021, the Ukrainian court found that the "the loan repayment and payment of all interest, fees, and other payments, which were set forth in the Loan Agreement No. 4N09129D. . . were made at the expense of funds received by [NZF] from its business activities, at the expense of the Guarantor and not at the expense of other loan funds, which were received by [NZF] under other loan agreements." NZF Decision, No. 910/14224/20 at *24. This finding by a Ukrainian court concerning issues of Ukrainian law directly contradicts the United States' allegation that Loan No. 4N09129D was a "fraud," and that the proceeds from that loan "constituted embezzlement and conversion." Compl. ¶¶ 48, 61. Another decision issued by the same Ukrainian court on the same day determined that a number of other loans the Complaint identifies as examples of allegedly fraudulent loans were in fact properly performed, including Loan Nos. 4N10122D, 4N10221D, 4N10224D, 4N10220D, and 4N10263D. NZF Decision, No. 910/14224/20 at *1-2; Compl. ¶ 39.
Another Ukrainian borrower identified in the Complaint, ZFZ, has filed at least four similar actions in Ukraine seeking declarations that its loans were properly performed. Each of those actions concern loans that are substantially similar to the ZFZ Loan identified in the Complaint, and expressly reference this case.6 The actions remain active and pending.
II. PARTIES
1. Optima Ventures is a Delaware limited liability company that is ultimately beneficially owned by Ihor Kolomoisky (a Ukrainian citizen holding 33.35% beneficial ownership), Gennady Boholiubov (a Ukrainian citizen holding 33.35% beneficial ownership), Mordechai Korf (a U.S. citizen holding 16.665% beneficial ownership) and Uriel Laber (a U.S. citizen holding 16.665% beneficial ownership).
Optima 7171 is a Delaware limited liability and wholly owned subsidiary of Optima Ventures, whose sole member is Optima Ventures.
2. All correspondence and notices relating to this case should be addressed to:
[...]
3. The United States is a party to the U.S.-Ukraine BIT. All future correspondence and notices relating to this arbitration should be addressed to the following addresses:
[...]
III. JURISDICTION
A. Claimants' Investment in Commercial Real Estate in Texas Constitutes an Investment under the U.S. Ukraine-BIT
4. Article I(1)(a) of the U.S.-Ukraine BIT defines "investment" to mean the following:
every kind of investment in the territory of one Party owned or controlled directly or indirectly by nationals or companies of the other Party, such as equity, debt, and service and investment contracts; and includes:
(i) tangible and intangible property, including rights, such as mortgages, liens and pledges;
(ii) a company or shares of stock or other interests in a company or interests in the assets thereof;
(iii) a claim to money or a claim to performance having economic value, and associated with an investment;
(iv) intellectual property which includes, inter alia, rights relating to:
literary and artistic works, including sound recordings, inventions in all fields of human endeavor, industrial designs, semiconductor mask works, trade secrets, know-how, and confidential business information, and trademarks, service marks, and trade names; and
(v) any right conferred by law or contract, and any licenses and permits pursuant to law
5. The Letter of Submittal addressed to U.S. President William J. Clinton by Secretary of State Warren Christopher recognizes that:
The Treaty's definition of investment is broad, recognizing that investment can take a wide variety of forms.. . . The definition provides a non-exclusive list of assets, claims and rights that constitute investment. These include both tangible and intangible property, interests in a company or its assets, "a claim to money or performance having economic value, and associated with an investment," intellectual property rights, and any rights conferred by law or contract (such as government-issued licenses and permits). The requirement that a "claim to money" be associated with an investment excludes claims arising solely from trade transactions, such as a transaction involving only a cross-border sale of goods, from being considered investments covered by the Treaty.
6. Claimants' investment in commercial real estate in Dallas, Texas, valued at $23.25 million, constitutes an "investment" as defined by Article I(1)(a) of the U.S.- Ukraine BIT. Claimant Optima Ventures is allocated all profits and losses from Optima 7171's ownership of the CompuCom Campus and controls the distribution of funds derived from the CompuCom Campus.
B. Under the U.S.-Ukraine BIT, the CompuCom Campus is Owned and Controlled by Ukrainian Nationals
7. As set forth in Article I(1)(a), "'investment' means every kind of investment in the territory of one Party owned or controlled directly or indirectly by nationals or companies of the other Party[.]"
8. Pursuant to Article I(1)(c), "' national,' of a Party means a natural person who is a national of a Party under its applicable law[.]"
9. Pursuant to Article VI(8):
For purposes of [this] arbitration. . ., any company legally constituted under the applicable laws and regulations of a Party or a political subdivision thereof but that, immediately before the occurrence of the event or events giving rise to the dispute, was an investment of nationals or companies of the other Party, shall be treated as a national or company of such other Party in accordance with Article 25(2)(b) of the ICSID Convention.
10. The Letter of Submittal addressed to President Clinton by Secretary of State Christopher recognizes that:
The Treaty's definition of investment is broad, recognizing that investment can take a wide variety of forms. It covers investments that are owned or controlled by nationals or companies of one of the Treaty partners in the territory of the other. Investments can be made either directly or indirectly through one or more subsidiaries, including those of third countries. Control is not specifically defined in the Treaty.
Ownership of over 50 percent of the voting stock of a company would normally convey control, but in many cases the requirement could be satisfied by less than that proportion.
11. As set forth above, Optima Ventures is a Delaware limited liability company ultimately beneficially owned by Ihor Kolomoisky (a Ukrainian citizen holding 33.35% beneficial ownership, including voting interests), Gennady Boholubov (a Ukrainian citizen holding 33.35% beneficial ownership, including voting interests), Mordechai Korf (a U.S. citizen holding 16.665% beneficial ownership, including voting interests) and Uriel Laber (a U.S. citizen holding 16.665% beneficial ownership, including voting interests). Optima 7171 is a wholly owned subsidiary of Optima Ventures whose sole member is Optima Ventures.
12. Kolomoisky and Boholiubov facilitated the provision of the funds used by Optima Ventures to invest in the Texas property. Given that Kolomoisky and Boholiubov are the majority (66.7%) owners of Optima Ventures and facilitated the provision of the funds used to purchase the Texas property, Optima Ventures' investment in the Texas property is "controlled directly or indirectly" by Ukrainian nationals. As stated by the Secretary of State in the Letter of Transmittal, "Ownership of over 50 percent of the voting stock of a company would normally convey control, but in many cases the requirement could be satisfied by less than that proportion." Ownership and control is more than adequately satisfied by Kolomoisky and Boholiubov's ultimate 66.7% ownership and voting interests.
IV. THE UNITED STATES BREACHED ITS OBLIGATIONS UNDER THE U.S.-UKRAINE BIT
A. The U.S.-Ukraine BIT Prohibits Unlawful Expropriation
13. Pursuant to Article III(1) of the U.S.-Ukraine BIT: Investments shall not be expropriated or nationalized either directly or indirectly through measures tantamount to expropriation or nationalization ("expropriation") except: for public purpose; in a nondiscriminatory manner; upon payment of prompt, adequate and effective compensation; and in accordance with due process of law and the general principles of treatment provided for in Article II(2).
Compensation shall be equivalent to the fair market value of the expropriated investment immediately before the expropriatory action was taken or became known, whichever is earlier; be calculated in a freely usable currency on the basis of the prevailing market rate of exchange at that time; be paid without delay; include interest at a commercially reasonable rate, such as LIBOR plus an appropriate margin, from the date of expropriation; be fully realizable; and be freely transferable.
14. With respect to Article III(1), the Letter of Submittal addressed to President Clinton by Secretary of State Christopher recognizes that:
Paragraph 1 describes the general rights of investors and obligations of the Parties with respect to expropriation and nationalization. These rights also apply to direct or indirect state measures "tantamount to expropriation or nationalization," and thus apply to "creeping expropriations" that result in a substantial deprivation of the benefit of an investment without taking of the title to the investment.
Paragraph 1 further bars all expropriations or nationalizations except those that are for a public purpose, carried out in a non-discriminatory manner; subject to prompt, adequate, and effective compensation"
[sic]; subject to due process; and accorded the treatment provided in the standards of Article II (3). (These standards guarantee fair and equitable treatment and prohibit the arbitrary and discriminatory impairment of investment in its broadest sense.)
B. The U.S.-Ukraine BIT Requires Fair and Equitable Treatment
15. Article II(3)(a)-(b) of the U.S. Ukraine BIT provides that:
3. (a) Investment shall at all times be accorded fair and equitable treatment, shall enjoy full protection and security and shall in no case be accorded treatment less than that required by international law.
(b) Neither Party shall in any way impair by arbitrary or discriminatory measures the management, operation, maintenance, use, enjoyment, acquisition, expansion, or disposal of investments. For purposes of dispute resolution under Article 3 VI and VII, a measure may be arbitrary or discriminatory notwithstanding the fact that a Party has had or has exercised the opportunity to review such measure in the courts or administrative tribunals of a Party.
16. With respect to Article II(3), the Letter of Submittal addressed to President Clinton by Secretary of State Christopher recognizes that:
Paragraph 3 guarantees that investment shall be granted "fair and equitable" treatment. It also prohibits Parties from impairing through arbitrary or discriminatory means, the management, operation, maintenance, use, enjoyment, acquisition, expansion or disposal of investment. This paragraph sets out a minimum standard of treatment based on customary international law
C. The U.S.-Ukraine BIT Provides Exceptions Only For "Measures Necessary for the Maintenance of Public Order," "International Peace or Security," or "Essential Security Interests"
17. Pursuant to Article IX of the U.S.-Ukraine BIT:
This Treaty shall not preclude the application by either Party of measures necessary for the maintenance of public order, the fulfillment of its obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests.
18. With respect to Article IX, the Letter of Submittal addressed to President Clinton by Secretary of State Christopher recognizes that:
Paragraph 1 of Article IX reserves the right of a Party to take measures for the maintenance of public order and the fulfillment of its obligations with respect to international peace and security, as well as those measures it regards as necessary for the protection of its own essential security interests. These provisions are common in international investment agreements.
D. The U.S.-Ukraine BIT Reserves Full Protections of Domestic Law and International Legal Obligations
19. In addition, Article VIII of the U.S. Ukraine BIT provides that:
This Treaty shall not derogate from:
(a) laws and regulations, administrative practices or procedures, or administrative or adjudicatory decisions of either Party;
(b) international legal obligations; or
(c) obligations assumed by either Party, including those contained in an investment agreement or an investment authorization, that entitle investments or associated activities to treatment more favorable than that accorded by this Treaty in like situations.
20. With respect to Article VIII, the Letter of Submittal addressed to President Clinton by Secretary of State Christopher recognizes that:
Article VIII clarifies that the Treaty is meant only to establish a floor for the treatment of foreign investment. An investor may be entitled to more favorable treatment through domestic legislation, other international legal obligations, or a specific obligation assumed by a Party with respect to that investor. This provision ensures that the Treaty will not be interpreted to derogate from any entitlement to such more favorable treatment.
E. The United States Violated Customary International Law and the Requirement of Fair and Equitable Treatment
21. In order to establish a violation of Article II(3)(a), there must be "an action or omission by the State which violates a certain threshold of propriety, causing harm to the investor, and with a causal link between action or omission and harm."8 Affording an investment "treatment less than that required by international law" constitutes a violation of Article II(3)(a).9
22. "'[T]he law of nations,' or customary international law, includes limitations on a nation's exercise of its jurisdiction to prescribe."10 "[C]ustomary international law provides the general default rules on prescriptive jurisdiction."11 The exercise of prescriptive jurisdiction is proper "when a genuine connection exists between the state seeking to regulate and the persons, property, or conduct being regulated."12 "This usually takes the form of a specific connection between the state and the subject being regulated, such as the conduct occurring on the state's territory or being committed by or against its nationals." 13
23. Although there are a number of "specific bases of jurisdiction," the bases for prescriptive jurisdiction "reflect a broader principle requiring a genuine or sufficiently close connection to justify or make reasonable the exercise of prescriptive jurisdiction."14
24. "Many commentators have posited the existence of [] a broader principle."15
For example:
Although it is usual to consider the exercise of jurisdiction under one or other of more or less widely accepted categories, this is more a matter of convenience than of substance. There is, however, some tendency now to regard these various categories as parts of a single broad principle according to which the right to exercise jurisdiction depends on there being between the subject matter and the state exercising jurisdiction a sufficiently close connection to justify that state in regulating the matter and perhaps also to override any competing rights of other states.16
25. The United States is attempting to regulate the propriety of conduct occurring in Ukraine - the management of a Ukrainian bank in the territory of Ukraine - and has expropriated Ukrainian investors' investment in the CompuCom Campus based on the United States' own interpretation and application of Ukrainian criminal law to Ukrainian conduct.
26. The United States' expropriation of the Ukrainian investors' investments, based on the United States' unilateral interpretation and application of Ukrainian law to conduct occurring in the territory of Ukraine is not a reasonable exercise of prescriptive jurisdiction under any circumstances. Such expropriation is particularly improper given that no Ukrainian prosecutor or law enforcement agency initiated any proceedings related to the conduct the United States is attempting to regulate.
The alleged conduct at PrivatBank did not occur in the United States, was not committed by or against United States nationals, does not implicate losses occurring in the United States, and does not reasonably implicate the United States' fundamental state interests.
27. The United States' exercise of prescriptive jurisdiction in this circumstance is also contrary to the competing rights of Ukraine.
28. Article 62 of the Constitution of Ukraine, dated 28 June 1996, (the "Ukrainian Constitution"), provides as follows:
Article 62. A person shall be deemed innocent of committing a crime and shall not be subjected to a criminal punishment unless his/her guilt has been proven through a legal procedure and established by a court verdict of guilty.17
29. This constitutional provision mandates that, inter alia, the determination that a crime has been committed by a certain person requires (1) adherence to a procedure, as prescribed by Ukrainian law, for investigating and proving the alleged crime; and (2) that the power to determine that the crime has been committed and that a certain person is guilty of that crime is vested ultimately and exclusively with the Ukrainian criminal court, which must issue its determination in the form of a court verdict of guilty.
30. The respective procedure and powers of Ukrainian authorities in conducting criminal proceedings are set out in the Criminal Procedure Code of Ukraine, dated 13 April 2012 (the "CrPCU").
31. Ukrainian law provides a pivotal role for the Ukrainian Prosecutor's Office in criminal proceedings in Ukraine. The Ukrainian Prosecutor's Office has overarching control over the investigation and, once the criminal proceeding reaches a stage that a suspect can be determined, the respective notice of suspicion either must be issued directly by the prosecutor, or must be approved by the prosecutor.18 Furthermore, once the pretrial investigation is completed, it is exclusively the prosecutor who is empowered to submit the charging (accusation) documents to the court,19 from which moment a suspect becomes an accused.20
32. Importantly, under Article 5 of the Law of Ukraine "On Prosecutor's Office," dated 14 October 2014, "functions of the prosecutor's office of Ukraine shall be exercised exclusively by the prosecutors. Delegation of the functions of prosecutor's office, as well as their appropriation by other authorities or officials shall be prohibited."21
33. Accordingly, the Ukrainian Prosecutor's Office has exclusive authority to charge a crime under the Criminal Code of Ukraine. Ukrainian law prohibits exercising this power by any other authority.
34. During the trial stage of a criminal proceeding, the Prosecutor's Office is exclusively empowered to prosecute the case before the Ukrainian criminal court.
Again, such power is expressly set out in the Ukrainian Constitution22. The court, in turn, has the exclusive power to establish and declare whether a crime has been committed and whether an individual charged with that crime by the Prosecutor's Office is guilty of that crime. This is derived from the aforementioned Article 62 of the Ukrainian Constitution, which requires that a fact that a certain person has committed a crime must be established by a court verdict of guilty (see paragraph 28 above), as well as from Article 124 of the Ukrainian Constitution providing that only courts are entitled to administer justice in Ukraine23, and that no one else can exercise the functions of the court.24
35. Neither Ihor Kolomoisky nor Gennadiy Boholiubov (nor, for that matter, anyone else) have been charged with the violations of the Criminal Code of Ukraine asserted by the United States in the Complaint, and no Ukrainian court has determined those crimes even occurred at all, much less that they were committed by a certain person or persons.
36. Pursuant to the aforementioned Article 62 of the Ukrainian Constitution (see paragraph 28 above), a person is deemed innocent of committing a crime unless and until the opposite has been duly proven through a legal procedure and established by the court verdict of guilty. The said provision refers to a judgment of the criminal court (court verdict of guilty), and it is only this court that can establish - as a result of the Ukrainian criminal proceeding (pretrial investigation followed by court trial) - that the crime has occurred, and that a certain person has committed a crime.
Without such a decision of the Ukrainian criminal court, any finding in the context of a civil claim that a person has committed a crime would be contrary to this constitutional entitlement.
37. "It is a well-established position of the Ukrainian courts that civil and commercial courts cannot establish violation of the criminal laws on their own and, therefore, cannot invoke any such violation unless it has been confirmed and determined in and pursuant to the respective judgment of the Ukrainian criminal court."25
38. One reason that the Ukrainian civil and commercial courts refuse to establish any violation of Ukrainian criminal laws on their own is because Ukrainian criminal law (substantive and procedural) should be viewed as a closed, self-contained system. As a matter of Ukrainian law, criminal substantive law and criminal procedural law do not exist without each other: rather, they necessarily complement and give life to each other (the latter "serves" the former).
39. As a result, no person can be found in breach of the provisions of the Criminal Code of Ukraine without a criminal investigation by Ukrainian law-enforcement authorities followed by a trial of the Ukrainian criminal court. During the criminal proceeding, the respective person is entitled to defend himself or herself exercising the rights granted to him or her by the Ukrainian Constitution and by the CrPCU. Kolomoisky and Boholiubov would exercise those rights if they were charged with the violations of the Criminal Code of Ukraine asserted by the United States. But, as noted above, Ukraine has brought no such charges.
40. To conclude, under Ukrainian law, all citizens have a right to be deemed to have not committed any alleged crime unless and until the opposite has been duly declared, determined and established by the Ukrainian criminal court. Ukrainian civil and commercial courts consistently and adamantly hold that they cannot establish on their own a violation of the Criminal Code of Ukraine and that the same cannot be established otherwise than by the Ukrainian criminal courts.
41. Because the courts in a civil case in Ukraine cannot declare that a violation of the Criminal Code of Ukraine has occurred, absent a finding of guilty in a criminal case, it is unreasonable for the United States to seize and deprive Ukrainian investors of their investments, based on the United States' unilateral and improper interpretation and application of Ukrainian law to conduct occurring in Ukraine.
42. "It is trite to say that criminal law and procedure are a most obvious and undisputed part of a State's sovereignty."26 While normally deference to State sovereignty would counsel against an arbitration tribunal interfering with the United States' application of its law and procedure, this is the rare case in which the United States is seeking to regulate in a civil case alleged criminal conduct occurring in another State's territory, and, in doing so, seeking to interpret and apply another State's criminal law and procedure, thereby depriving another State's investors of their investments. Because the other State (Ukraine) has not itself brought criminal charges (let alone obtained a conviction), and because Ukrainian criminal law and procedure require a criminal conviction before a civil court can declare that a crime has occurred (or impose liability for criminal conduct), the United States' attempted expansion of prescriptive jurisdiction to deprive the Ukrainian investors of their investments is unreasonable. The United States is effectively seeking to substitute itself for the Ukrainian Prosecutor's Office and thereby intrude upon the "criminal law and procedure" of Ukraine, which is a "most obvious and undisputed part of a State's sovereignty."27
43. "[I]nterfere[nce] with a foreign nation's ability to regulate its own commercial affairs" is only reasonable to "redress domestic. . . injury caused by foreign. . . conduct."28 "[I]t is not reasonable to apply American laws to foreign conduct insofar as that conduct causes independent foreign harm that alone gives rise to a plaintiff's claim."29 In the latter circumstance, "[t]he risk of interference [with foreign sovereignty] is the same, but the justification for the interference seems insubstantial."30
44. The United States' conduct both violates customary international law's "limitations on a nation's exercise of its jurisdiction to prescribe,"31 and unlawfully interferes with Ukrainian sovereignty and jurisdiction to enforce its own laws, in accordance with its own procedures and Constitutional requirements, within its own territory. Because the United States' conduct violates customary international law, the United States has violated Article II(3)(a)-(b) of the U.S.-Ukraine BIT.
F. The United States' Conduct Violates the Doctrine of "Prescriptive Comity"
45. Pursuant to Article VIII of the U.S.-Ukraine BIT, the Treaty is meant only to establish a floor for the treatment of foreign investment. An investor may be entitled to more favorable treatment through domestic law. This provision ensures that the U.S-Ukraine BIT will not be interpreted to limit entitlement to such more favorable treatment.
46. "In interpreting the geographic scope of federal law, courts [in the United States] seek to avoid unreasonable interference with the sovereign authority of other states."32 "This principle of interpretation accounts for the legitimate sovereign interests of other nations and helps the potentially conflicting laws of different nations work in harmony."33 "The Supreme Court has described reasonableness as a principle of 'prescriptive comity.'"34
47. "[N]othing would be more convenient in the promiscuous intercourse and practice of mankind, than that what was valid by the laws of one place, should be rendered of no effect elsewhere, by a diversity of law[.]"35 "'Comity,' in the legal sense, is neither a matter of absolute obligation, on the one hand, nor of mere courtesy and good will, upon the other."36 "But it is the recognition which one nation allows within its territory to the legislative, executive or judicial acts of another nation, having due regard both to international duty and convenience, and to the rights of its own citizens or of other persons who are under the protection of its laws." 37
48. Under the principle of prescriptive comity, "interfere[nce] with a foreign nation's ability to regulate its own commercial affairs" is only reasonable to "redress domestic. . . injury caused by foreign. . . conduct."38 "[I]t is not reasonable to apply American laws to foreign conduct insofar as that conduct causes independent foreign harm that alone gives rise to a plaintiff's claim."39
49. Moreover, "[a]n act of congress ought never to be construed to violate the law of nations if any other possible construction remains."40 The United States "construe[s] statutes to avoid unreasonable interference with other nations' sovereign authority where possible."41 50. Under Ukrainian law, there can be no civil liability for violations of the Criminal Code of Ukraine, absent a preexisting finding of guilty in a Ukrainian criminal court. Ukrainian civil and commercial courts consistently and adamantly hold that they cannot establish on their own a violation of the Criminal Code of Ukraine and that the same cannot be established otherwise than by the Ukrainian criminal courts.
51. The forfeiture and money laundering statutes referenced by the United States in support of the seizure and expropriation of the Ukrainian investors' investments effectively require two elements: (1) the receipt of criminally derived property or transactions "to conceal or disguise the nature, the location, the source, the ownership, or the control of the proceeds"; and (2) that the funds at issue are in fact traceable to "specified unlawful activity." See 18 U.S.C. §§ 1956-57. In other words, for there to be a forfeiture under U.S. law, there must be underlying criminal activity.
52. The "specified unlawful activit[ies]" cited by the United States in support of the expropriation of the Ukrainian investments are 18 U.S.C. § 1956(c)(7)(B)(iii) and 18 U.S.C. §§ 2314-2315.
53. The "specified unlawful activity" set forth in 18 U.S.C. § 1956(c)(7)(B)(iii) is an offense against a foreign nation involving--. . . (iii) fraud, or any scheme or attempt to defraud, by or against a foreign bank (as defined in paragraph 7 of section 1(b) of the International Banking Act of 1978))
54. As set forth above, 18 U.S.C. § 1956(c)(7)(B)(iii) requires an underlying "offense against a foreign nation," i.e., a criminal fraud against a foreign bank, pursuant to the criminal laws of the foreign country.42
55. Likewise, 18 U.S.C. §§ 2314-2315 applies to the transfer or receipt of stolen monies "knowing the same to have been stolen, converted or taken by fraud." The United States has alleged that the CompuCom Campus is forfeitable pursuant to 18 U.S.C. §§ 2314-2315 because it is "traceable to an international conspiracy to launder money embezzled and fraudulently obtained from PrivatBank."43 The United States further alleges that "Kolomoisky and Boholiubov's embezzlement and fraud, and the actions they took at PrivatBank to further their scheme, violated" the Criminal Code of Ukraine.44 In sum, the United States seeks to forfeit and expropriate the CompuCom Campus based on alleged violations of 18 U.S.C. §§ 2314-2315 Those violations of U.S. law, however, necessarily are alleged to arise solely because they stem from and depend on alleged violations of Ukrainian criminal law that have not been charged, let alone proven, by Ukrainian authorities.
56. As noted, Ukrainian civil and commercial courts uniformly hold that - in the absence of criminal charges filed by the Ukrainian Prosecutor's Office and a finding of violations of the Criminal Code of the Ukraine by a Ukrainian criminal court - they lack authority to conclude, determine or find that conduct violates the Criminal Code of Ukraine. It necessarily follows that under the United States' doctrine of "prescriptive comity," the specified unlawful activity set forth in 18 U.S.C. §§ 2314- 2315 and 18 U.S.C. § 1956(c)(7)(B)(iii) should not and cannot be interpreted to apply to the alleged conduct occurring in Ukraine until a Ukrainian prosecutor proves as much in a Ukrainian criminal court, pursuant to the applicable procedures and Constitutional requirements central to Ukrainian law.45 This interpretation accords with the United States' principle of "prescriptive comity" by providing due respect for the laws and constitution of Ukraine, as well as Ukraine's jurisdiction to prescribe and enforce its laws within its own territory.
G. The United States Is Further Violating Its Own Doctrine of "Adjudicatory Comity"
57. The United States commenced its Ukraine-centric dispute in a domestic forum in disregard for the Related Actions that have been pending in Ukraine. This further violated the doctrine of "adjudicatory" international comity, which requires deference to parallel foreign proceedings, where the foreign sovereign has stronger interests than the United States, where the foreign forum is fairer and more convenient, and where deference would promote judicial efficiency.46
58. Here, Ukraine's interests predominate over this action. The United States' entire case rests on an expansive web of alleged conduct that was conceived, directed, and executed in Ukraine by Ukrainian oligarchs, bank agents, and corporate borrower entities. The Complaint alleges that two Ukrainian nationals, Kolomoisky and Boholiubov, misappropriated assets from PrivatBank, "a Ukrainian financial institution located in Ukraine." Compl. ¶¶ 12, 13, 17. It alleges that Kolomoisky and Boholiubov caused PrivatBank to issue loans to companies they owned or controlled, naming three such companies - NZF, ZFZ, and OGZK - all of which are based in Ukraine. Id. ¶¶ 36-57. It alleges that Kolomoisky and Boholiubov established a de facto "credit committee" at PrivatBank, consisting of PrivatBank employees, to approve the allegedly unlawful loans. Id. ¶¶ 58-64. It alleges that Kolomoisky and Boholiubov laundered the loan proceeds through a network of shell companies, which they created and controlled, at a PrivatBank branch "controlled by PrivatBank in Ukraine." Id. ¶¶ 77-83. And it alleges that the losses primarily impacted PrivatBank in Ukraine. Id. ¶¶ 84-86. The four corners of the pleadings leave no doubt that the nexus of the alleged scheme was rooted in Ukraine, and Ukraine has an overriding interest in prosecuting, proving and regulating allegedly criminal conduct in its own borders, pursuant to and in accordance with its own procedures and Constitutional requirements.47
59. Ukraine's interests also eclipse that of the United States. The sole conduct alleged in the United States is the after-the-fact use of the allegedly unlawful proceeds to purchase real estate in Texas. However, none of the downstream conduct would be unlawful but for the allegations of wrongdoing in Ukraine. More fundamentally, to permit the United States to pursue claims that require U.S. courts to determine the legality of conduct in the Ukraine runs contrary to the United States' interests in respecting Ukraine's judicial process, Ukraine's criminal procedures, Ukraine's sovereign rights of Ukraine, and Ukraine's Constitution, which provides that only Ukrainian criminal courts may determine and establish that a crime has been committed under Ukrainian law.48 In the absence of such ruling by a Ukrainian criminal court, any finding in a U.S. court concerning the legality of conduct in the Ukraine would invade Ukraine's sovereignty and its longstanding Constitutional principles. Nevertheless, the United States - unable to refer to a single criminal investigation or charge levied against a single person or defendant in Ukraine concerning the management of PrivatBank - relies on its own interpretation and application of Ukrainian criminal law to conduct occurring in Ukraine, for which Ukraine itself has not brought any such charges.
60. Moreover, Ukraine is a fairer and more convenient forum for the litigation of the United States' allegations. The availability of highly critical witnesses and the ability to obtain relevant documentary evidence render Ukraine a significantly more convenient forum than the United States. The overwhelming majority of the evidence relevant to the conduct alleged in the Complaint is located in Ukraine and will be extremely difficult, if not impossible, for Claimants to obtain in the United States. Such evidence concerns, among other things, the origination of purportedly fraudulent loans by a Ukrainian bank to Ukrainian entities (Compl. ¶¶ 33-63); the transfer of such funds both within and outside Ukraine, including through PrivatBank accounts allegedly located in numerous other foreign nations (id. ¶¶ 74- 83); the organization and activities of the purported "electronic" credit committee at PrivatBank (id. ¶¶ 56-62); and information concerning the routing of funds through PrivatBank Cyprus (id. ¶¶ 79-81).
61. Ukraine and the United States are both signatories to the Hague Convention of 18 March 1970 on the Taking of Evidence Abroad in Civil or Commercial Matters (the "Evidence Convention"), which applies to requests for documents or deposition testimony. Ukraine, however, has issued a reservation to the Evidence Convention that it "will not execute letters of request issued for the purpose of obtaining pre-trial discovery of documents as known in common law countries," effectively precluding pre-trial discovery in United States courts of documentary evidence in Ukraine.49
62. Nor would Claimants be able to compel the testimony of any witness who refuses to testify voluntarily, as the United States courts have no ability on their own to compel testimony from the many witnesses located in Ukraine.
63. Given the availability of relevant and crucial documentary evidence and witnesses in Ukraine, and the absence of such evidence and witnesses in the United States, Ukraine is a fairer and more convenient forum for the litigation of the United States' claims.
H. The United States Has Unlawfully Expropriated Ukrainian Investments
64. Pursuant to the U.S.-Ukraine BIT, the United Sates is obligated to provide "prompt, adequate and effective compensation"50 for the expropriation of the CompuCom Campus.
65. The United States cannot find exception in a "measure[] necessary for the maintenance of public order, the fulfillment of [the State's] obligations with respect to the maintenance or restoration of international peace or security, or the protection of its own essential security interests."51
66. The expropriation of the Ukrainian investors' investments, based upon purported misappropriations and losses occurring within the territory of Ukraine, is not "necessary for the maintenance of public order"52 in the United States, but rather seeks to regulate conduct occurring in the territory of Ukraine.53
67. "[I]nterfere[nce] with a foreign nation's ability to regulate its own commercial affairs" is only reasonable to "redress domestic. . . injury caused by foreign. . . conduct."54 "[I]t is not reasonable to apply American laws to foreign conduct insofar as that conduct causes independent foreign harm that alone gives rise to a plaintiff's claim."55
68. The United States' expropriation not only seeks to redress an alleged foreign injury, it intrudes upon the competing rights of Ukraine. Ukrainian law precludes imposition of civil liability for alleged violations of the Criminal Code of Ukraine, prior to a criminal conviction in a Ukrainian court.
69. Even if the United States is able to craft a tenuous "public purpose" argument for the expropriation, compensation is still required.56 "If public purpose automatically immunizes the measure from being found to be expropriatory, then there would never be a compensable taking for a public purpose."57 "[T]he purpose for which the property was taken 'does not alter the legal character of the taking for which adequate compensation must be paid.' "58 The legal element in question is whether the act is expropriatory or not. "59
70. The use of the Ex Parte Restraining Order to compel the transfer of the proceeds of the CompuCom Campus sale to the custody of the United States Marshals Service constitutes expropriation because "[a] transfer to a third party may amount to an expropriation attributable to the State if the judicial process was instigated by the State."60
71. Moreover, the utilization of the United States judicial system by the United States executive branch (the Department of Justice) to encumber and expropriate Ukrainian investments, based upon alleged criminal conduct and losses within the territory of Ukraine, constitutes unlawful expropriation, insofar as it exceeds the limits of prescriptive jurisdiction and the principle of prescriptive comity.61
72. As set forth in paragraphs 64 through 71 supra, the United States' expropriation violates customary international law's "limitations on a nation's exercise of its jurisdiction to prescribe,"62 and unlawfully interferes with Ukrainian sovereignty and intrudes upon Ukrainian jurisdiction to prescribe within its own territory.
73. Because the expropriation was not "necessary for the maintenance of public order"63 in the United States, and because "[i]nterfere[nce] with a foreign nation's ability to regulate its own commercial affairs" is only reasonable to "redress domestic. . . injury caused by foreign. . . conduct,"64 the United States is not exempted from its obligation to provide prompt, adequate and effective compensation for the expropriation of the CompuCom Campus. "[P]rompt, adequate and effective compensation" is required pursuant to Article III(1).
I. United States Civil Forfeiture Law Fails to Provide Due Process
74. Article 8 of the Universal Declaration of Human Rights provides that: Everyone has the right to an effective remedy by the competent national tribunals for acts violating the fundamental rights granted him by the constitution or by law.
75. Article 10 of the Universal Declaration of Human Rights provides that: Everyone is entitled in full equality to a fair and public hearing by an independent and impartial tribunal, in the determination of his rights and obligations and of any criminal charge against him.
76. The United States and Ukraine are parties to the International Covenant on Civil and Political Rights. Article 14 of the International Covenant on Civil and Political Rights provides that:
All persons shall be equal before the courts and tribunals. In the determination of any criminal charge against him, or of his rights and obligations in a suit at law, everyone shall be entitled to a fair and public hearing by a competent, independent and impartial tribunal established by law.
77. "Some basic legal mechanisms, such as reasonable advance notice, a fair hearing and an unbiased and impartial adjudicator to assess the actions in dispute, are expected to be readily available and accessible to the investor to make such legal procedure meaningful."65 "In general, the legal procedure must be of a nature to grant an affected investor a reasonable chance within a reasonable time to claim its legitimate rights and have its claims heard."66 "If no legal procedure of such nature exists at all, the argument that the actions are taken under due process of law rings hollow."67
78. The ex parte procedure employed by the United States to seize control of the CompuCom Campus and mandate the transfer of the sale proceeds to the United States Marshals Service constitutes violation of both customary international law's minimum standards of due process and Article 14 of the International Covenant on Civil and Political Rights.
79. Claimants had no "reasonable advance notice" - there was no advance notice at all, and no "fair hearing" - there was no hearing at all. The United States' ex parte procedure deprived Claimants of the entire $23,250,000.00 investment without a hearing or opportunity to respond.
80. Claimants are not alone in arguing that the United States' civil forfeiture laws violate due process. Numerous scholars have commented on the due process violations caused by the United States' civil forfeiture laws.68
81. On October 26, 2020, a bipartisan group of U.S. Senators introduced legislation to protect property owners whose assets are seized by the federal government.69 The short title of the proposed legislation is the "Deterring Undue Enforcement by Protecting Rights of Citizens from Excessive Searches and Seizures Act of 2020."70
82. The Deterring Undue Enforcement by Protecting Rights of Citizens from Excessive Searches and Seizures Act of 2020 seeks to "to protect the rights of people whose property has been seized without any judicial finding of wrongdoing" and to "ensur[e] that due process never takes a back seat to expediency."71
83. U.S. Senator Chuck Grassley has stated in connection with the proposed legislation that:
Asset forfeiture authorities are effective tools for law enforcement, but we have seen time and again these tools are ripe for abuse. Too often Americans do not receive notice that their property was seized, or the civil seizure is never connected to any charged criminal conduct.
84. Pursuant to, inter alia, Articles II(3) and III(1) of the U.S.-Ukraine BIT, the United States is obligated to compensate Claimants for damages sustained from the ex parte forfeiture procedure, which violates the International Covenant on Civil and Political Rights and customary international law's minimum due process requirements.
85. In addition to money damages, Claimants seek a declaration that the United States' civil forfeiture law and the ex parte seizure mechanism utilized against Claimants violates the minimum due process requirements of customary international law and the obligations of the United States pursuant to the International Covenant on Civil and Political Rights.
J. The United States is Wrong on the Merits
86. In addition to the violations set forth above, the United States is simply wrong on the merits: there was no underlying impropriety in Ukraine, and, in any event, 33.33% owners Mordechai Korf and Uriel Laber are innocent owners. Indeed, the sole conduct alleged in the United States is the after-the-fact use of the allegedly unlawful proceeds to purchase real estate in Texas. None of the downstream conduct would be unlawful but for the allegations of wrongdoing in Ukraine.
87. Because the United States is wrong on the merits, the expropriation cannot constitute a "measure[] necessary for the maintenance of public order" pursuant to Article IX of the U.S.-Ukraine BIT, and there is no exception to the requirement for "payment of prompt, adequate and effective compensation" pursuant to Article III of the U.S.-Ukraine BIT. Moreover, because the United States is wrong on the merits, the expropriation is "arbitrary" as set forth in Article II(3)(2) of the U.S.- Ukraine BIT.
V. DAMAGES
A. Customary International Law Requires Full Reparation For Damages Resulting From The Breach Of An International Obligation
88. The customary international law standard for compensation is best enunciated in the Chorzów Factory case, i.e., the "full reparation" standard for compensation.72 In Chorzów Factory, the Permanent Court of International Justice stated that:
The essential principle contained in the actual notion of an illegal act.
.. ] is that reparation must, as far as possible, wipe out all the consequences of the illegal act and reestablish the situation which would, in all probability, have existed if that act had not been committed.73
89. The "full reparation" principle is also codified in the International Law Commission Articles (the "ILC Articles"). ILC Article 31 states that "[t]he responsible State is under an obligation to make full reparation for the injury caused by the internationally wrongful act."74 ILC Article 34 ("Forms of reparation") further requires "[f]ull reparation for the injury caused by the internationally wrongful act shall take the form of restitution, compensation and satisfaction, either singly or in combination[.]"75 "The compensation shall cover any financially assessable damage including loss of profits insofar as it is established."76 90. The customary international law standard applies to all host State treaty breaches.77 The purpose of an award of damages is to place the Claimants in the same position in which it would have been if the State had not violated the treaty.
B. Claimants' Initial Assessment of Damages
91. Claimants currently estimate direct damages to be in excess of USD $23.25 million, which amount includes the net proceeds of the sale of the Texas property.
92. Claimants reserves their right to quantify and modify their claims at an appropriate stage of these proceedings.
C. Claimants are Entitled to Arbitration Costs and Expenses
93. The principle of full reparation requires that Claimants be made whole for the costs of the arbitration, including legal and expert fees, and all other arbitration fees and expenses.
94. Article 61(2) of the ICSID Convention provides:
In the case of arbitration proceedings the Tribunal shall, except as the parties otherwise agree, assess the expenses incurred by the parties in connection with the proceedings, and shall decide how and by whom those expenses, the fees and expenses of the members of the Tribunal and the charges for the use of the facilities of the Centre shall be paid.
Such decision shall form part of the award.
VI. AGREEMENT TO ARBITRATE
95. The U.S.-Ukraine BIT sets out certain requirements and suggestions before an arbitration can commence. First, "the parties to the dispute should initially seek a resolution through consultation and negotiation."78 Second, the U.S.-Ukraine BIT requires "that six months have elapsed from the date on which the dispute arose" prior to "consent[ing] in writing to the submission of the dispute for settlement by binding arbitration."79
96. The dispute arose on August 6, 2020 when the United States commenced forfeiture proceedings against the Texas property owned by Claimants. On February 2, 2021, "[s]ix months will have elapsed from the date on which the dispute arose."80
97. On October 5, 2020, Claimants provided the United States with notice of their intention to arbitrate in their Verified Claims filed in the United States District Court for the Southern District of Florida. Therein, Claimants stated:
Claimant reserves any and all defenses and objections, including as to this Court's jurisdiction over the subject of this action, including that such claims should be submitted to arbitration pursuant to the Treaty Between the United States of America and Ukraine Concerning the Encouragement and Reciprocal Protection of Investment, dated March 4, 1994.
98. Claimants provided further notice of their intention to arbitrate in email correspondence dated October 6, 2020 and October 21, 2020. Specifically, on October 6, 2020, Claimants sent an email to the United States which alleged, inter alia, unlawful "expropriation or nationalization" and violations of the "fair and equitable" treatment standard, stating:
We write on behalf of Optima Ventures, LLC ("Optima Ventures") pursuant to the Treaty Between the United States of America and Ukraine Concerning the Encouragement and Reciprocal Protection of Investment (the "U.S.-Ukraine BIT").
...
Based on its allegations and legal theories, the United States obtained an ex parte restraining order preventing Mordechai Korf, Uriel Laber, Ihor Kolomoisky, and Gennaidy Boholiubov from directly or indirectly, transferring, selling, assigning, pledging, distributing, encumbering, attaching or disposing of in any manner, causing to be transferred, sold, assigned, pledged, distributed, encumbered, attached or disposed of in any manner; or taking, or causing to be taken any action that would have the effect of depreciating, damaging, or in any way diminishing the value of Optima Ventures' investment in a certain property located in Dallas, Texas.
The United States also previewed in its complaint an intention to apply this sort of legal theory and ex parte mechanism to numerous other properties in which Optima Ventures has invested.
Please advise as to whether the United States agrees that its requested relief (and the ex parte relief already obtained in Case Number 1:20- cv-23278-MGC) fall within the scope of the U.S.-Ukraine BIT such that this dispute is capable of submission to dispute resolution pursuant to Article VI of the U.S.-Ukraine BIT.
...
In the event that we reach an impasse, we reserve our right to proceed to submit the matter to arbitration.81
99. On October 21, 2020, Claimants sent a follow up email stating:
[O]n October 6, 2020, Claimants requested the position of the United States as to the arbitrability of the dispute in case number 20-cv-23278, as set forth in the Treaty Between the United States of America and Ukraine Concerning the Encouragement and Reciprocal Protection of Investment (the "U.S.-Ukraine BIT"). Please advise as to the United States' position regarding arbitration pursuant to the U.S.-Ukraine BIT at the earliest opportunity. We are available to consult with the United States pursuant to Article VI(2). The position of the United States will inform the substance of the responsive motions. If the United States is unable to provide its position, Claimants reserve their right to initiate arbitration of their own initiative.82
100. Claimants have consistently refused to submit their claims for breaches of the U.S.-Ukraine BIT either to the courts or administrative tribunals of the United States or to any other applicable dispute settlement procedure, repeatedly stating, "Claimants reserve their right at the appropriate time under the treaty to commence arbitration and to move to compel arbitration."83
101. By virtue of submitting this Notice of Arbitration, Claimants hereby consent to arbitration in accordance with the procedures set forth in Article VI of the U.S.- Ukraine BIT.
102. The United States has consented to arbitration by virtue of Article VI of the U.S.-Ukraine BIT, which provides, inter alia, that:
4. Each Party hereby consents to the submission of any investment dispute for settlement by binding arbitration in accordance with the choice specified in the written consent of the national or company under paragraph 3. Such consent, together with the written consent of the national or company when given under paragraph 3 shall satisfy the requirement for:
(a) written consent of the parties to the dispute for purposes of Chapter II of the ICSID Convention (Jurisdiction of the Center) and for purposes of the Additional Facility Rules; and
(b) an "agreement in writing," for purposes of Article II of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, done at New York, June 10, 1958 ("New York Convention")
103. Finally, Claimants have attempted to consult to resolve the present dispute with the United States. These consultations were unsuccessful. The United States maintains that, "None of the measures referenced. . . constitute violations of the U.S.-Ukraine BIT."84
...
Footnotes omitted