Legal Insight: Ukraine Could Be Liable to Bondholders for Terminating Debts on Eurobonds Issued by Recently Nationalized Privatbank

Ukraine nationalized Privatbank, its largest bank, in December 2016. In the process, Ukraine mandatory converted into bank’s shares all the debt obligations of Privatbank on borrowings from Eurobonds for the principal amount of US$ 595 million. Notes lost their value due to these governmental measures.

Some bondholders voiced their intentions to pursue LCIA arbitration against the state-owned Privatbank. In this Legal Insight, we consider, as an alternative remedy, investor-state claims against Ukraine under its bilateral investment treaties. Under applicable BITs, Ukraine may be liable to the bondholders for its arbitrary measures directed at the termination of the Privatbank’s debt obligations on Eurobonds. Such treaty-based claims against Ukraine have lower enforcement risks and better prospects of being settled amicably.

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