A CRIMEAN CONUNDRUM
Following Ukraine’s emergence as an independent state, numerous foreign investors have made investments in Crimea. The investments have increasingly focused on the exploration and exploitation of natural resources, but also cover many other sectors. As a result of Crimea’s disputed incorporation into Russia, foreign investors find themselves in a Kafkaesque legal situation and will be forced to make choices with unpredictable legal consequences.
Although foreign investments in Crimea may have been structured in different ways, they are all made within the framework of the Ukrainian legal system. In many instances, foreign investors have formed Ukrainian companies or established branch or representative offices in Ukraine. Investments are also commonly dependent on permits and licences issued by Ukrainian authorities and may involve property rights registered with Ukrainian authorities, as well as deposits and loans with Ukrainian banks.
There is nothing unusual about this kind of connection between foreign investments and the legal system of the host state. What is unusual, however, is that a different state now de facto controls the territory where the investments were made. Whether lawful or not, Russia’s effective control over the Crimean peninsula and adjacent waters gives the state the practical ability to impose Russian law on the territory.
Jul-Sep 2014 issue