A Chinese company is dragging the Ukrainian government to the Permanent Court of Arbitration in The Hague. Skyrizon is seeking $ 4.5 billion in compensation for its failed takeover bid for Motor Sich, one of the world’s most advanced military aircraft engine makers.
Skyrizon bought 41% of Motor Sich and continued to seek a controlling stake. While Skyrizon announced plans to invest an additional $ 250 million in Ukrainian factories, the deal was frozen by a Ukrainian court. The Ukrainian government has announced that it will nationalize Motor Sich for reasons of national security. Ukrainian President Volodymyr Zelensky has imposed sanctions on Skyrizon, preventing him from moving his capital out of the country.
Usually, Chinese companies request arbitrations under bilateral agreements or international arbitration institutions such as the International Center for Settlement of Investment Disputes. An application in The Hague is quite unique for Chinese companies and it demonstrates the seriousness of their intentions.
The Ukrainian government‘s position seems illogical. On the one hand, President Zelensky assured Xi Jinping that his country could become a “bridge to Europe” for Chinese companies. On the other hand, Ukraine violated a reciprocal investment protection agreement between Beijing and Kiev.
Chinese political experts believe Ukraine followed White House instructions. On the economic front, the decision of the Ukrainian side does not seem to be well considered, China being the biggest trading partner of Ukraine. Such irresponsibility of the Ukrainian government can frighten other Ukrainian trading partners, for example, Turkey which is also the competitor of the United States in the arms trade. Showing blind loyalty to the United States, Ukraine could lose profitable contracts and the credibility of its current and potential partners.
*Neil Karpenko, Ukrainian history and politics researcher residing in Toronto, Canada. Contributing author for Haaretz, The Hill Times and Morning Star.