In Emergofin B.V. and Velbay Holdings Ltd. v. Ukraine, the Tribunal rejected the claim for moral damages from the outset. It did not treat moral damages as only a question of evidence or valuation; the Tribunal went further and held that the claim fell outside its jurisdiction or, alternatively, was inadmissible.[1]
The Award incorporates the Tribunal’s earlier Decision on Jurisdiction, Admissibility and Liability, in which the Tribunal addressed the claim for moral damages. In this case, the Claimants’ claim for moral damages was based on alleged reputational harm to themselves and their representatives, as well as physical and psychological harm allegedly suffered by their representatives.[2]
Investor-State arbitration is a mechanism through which a foreign investor may bring a claim directly against the host State of the investment before an international arbitral tribunal for an alleged breach of an investment treaty.[3]
In Emergofin v. Ukraine, the Tribunal took a restrictive approach. Before considering whether the alleged harm had been established, or how it should be valued, the Tribunal examined whether the claim fell within the scope of the Netherlands-Ukraine BIT and within its mandate. The Tribunal considered not only whether the Claimants had suffered non-material harm, but also whether it had the power to hear such a claim.[4]
Consequently, the Tribunal adopted a narrow approach to the circumstances in which claimants may seek compensation for personal distress, reputational injury to individuals or harm suffered by corporate representatives. However, the Tribunal did not exclude moral damages altogether. It left open the possibility that such damages might, in some circumstances, be recovered for reputational harm suffered by the investment itself.[5]
The Facts
The Claimants, Emergofin B.V. and Velbay Holdings Ltd., sought USD 5,000,000 for “non-material or moral damages”, in addition to their claim for material damages. They argued that Ukraine’s conduct had caused harm that was not purely economic and relied on three alleged categories of harm to establish moral damages.[6]
First, the Claimants relied on reputational harm to themselves and their representatives, said to have resulted from criminal investigations involving serious accusations, including terrorism and organised crime. Second, they alleged that their representatives had suffered physical and psychological harm during ZAlK management and shareholder meetings, including threats and interference with their physical integrity, freedom and property. Third, they alleged that Ukraine had maliciously harassed their representatives to obstruct the presentation of the Claimants’ case in the arbitration.[7]
The claim was framed principally around reputation, physical integrity, psychological harm, and litigation-related harassment affecting the Claimants or their representatives, rather than harm to the protected investment itself.[8]
Ukraine objected that the Tribunal lacked the power to award such damages and argued that the Netherlands-Ukraine BIT protected investments, not investors or their representatives as persons.[9]
To support its arguments, Ukraine relied on two provisions of the Netherlands-Ukraine BIT. First, Article 3(2) required Ukraine to accord protected investments fair and equitable treatment and full physical security and protection. Second, Article 9(1) limited the Tribunal’s jurisdiction to disputes “concerning an investment”. Ukraine argued that these provisions protected investments as assets and did not extend to non-material harm suffered personally by investors or their representatives. The Tribunal accepted this distinction, holding that the BIT protected investments as assets, not the personal interests of the investors or their representatives.[10]
Issues
The case raised a central legal question: whether an investment treaty tribunal could award moral damages for harm suffered not by the protected investment itself, but personally by the investor or its representatives.[11] This question involved, first, whether the principle of full reparation could extend the scope of the treaty to cover non-material harm falling outside its protected object and, second, whether such damages could be awarded as a lump sum of several million dollars without proof of actual non-material harm or a reasoned method of quantification.[12]
Holding
The Tribunal held that the Claimants’ moral-damages claim fell outside its jurisdiction or, alternatively, was inadmissible. This conclusion was reproduced in the Award’s summary of the Tribunal’s earlier Decision.[13]
The Tribunal did not strictly decide that reputational harm could never be compensable in investor-State arbitration; it left open the possibility that damages based on evidence of reputational harm to the investment itself might, in some cases, be recoverable. However, no such claim had been pleaded in this case.[14]
Reasoning and Disposition
First, the treaty imposed an important limitation on the Tribunal’s jurisdictional mandate. Indeed, Article 9 only allowed the Tribunal to deal with disputes connected to an investment. Thus, the treaty protected the investment itself, not the investor or its representatives personally. For the claim to fall within the Tribunal’s jurisdiction, it had to be closely linked to the protected investment.[15]
The Tribunal then considered the nature of the rights invoked by the Claimants. It found that rights relating to reputation, physical integrity and psychological well-being were personal rights. They were attached to the persons who owned or controlled the investment, not to the investment itself. For that reason, they were not “assets” and could not qualify as an “investment” under the treaty.[16]
The Tribunal also held that the principle of full reparation could not change that conclusion. Full reparation may allow compensation for harm caused to the investment, but it cannot extend treaty protection to personal harm suffered by individuals, such as personal distress, physical injury or reputational harm.[17]
The Tribunal’s interpretation was reinforced by Article 31 of the Vienna Convention on the Law of Treaties. The phrase “concerning an investment” had to be read consistently with the treaty’s substantive protections, which were limited to investments. Thus, within the limits of its treaty-based mandate, the Tribunal could not decide claims concerning personal injury or reputational harm that fell outside the scope of the protection afforded to the investment. The Tribunal was not a “court of general jurisdiction”.[18]
The Tribunal also reviewed the earlier cases relied on by the Claimants and found them unpersuasive. It distinguished the Lusitania decision because the commission in that case had an express mandate to decide claims for death, personal injury and property loss. By contrast, the investment-treaty cases cited by the Claimants either did not address the tribunal’s power to award moral damages or accepted that possibility without detailed treaty-based analysis.[19]
Finally, the Tribunal distinguished compensatory damages from punitive or exemplary damages. It considered that an award unsupported by proof of actual harm would punish the respondent rather than compensate the claimant. Although the Claimants expressly stated that they were not seeking punitive or exemplary damages, they had not proved the alleged non-material harm or explained how the amount claimed had been calculated. In those circumstances, awarding several million dollars would have been punitive rather than compensatory. Moreover, the Tribunal considered that it had no power to award punitive or exemplary damages.[20]
The claim for moral damages therefore failed. The Tribunal made clear that, even apart from the jurisdictional and admissibility issues, unsupported assertions of non-material harm could not sustain a compensatory award.[21]
Conclusion
The Tribunal’s decision in Emergofin v. Ukraine reinforces the position that moral damages are not automatically available merely because the alleged State conduct is serious or wrongful.[22] Accordingly, a claimant must first identify an interest protected by the treaty, demonstrate that the alleged harm falls within the scope of that protection, and prove both the existence and amount of the harm.[23]
To conclude, moral-damages claims based on harm suffered personally by investors, managers, witnesses or corporate representatives may fail unless the treaty expressly protects such interests. The position may be different where the reputational harm is suffered by the protected investment itself. For respondent States, the decision may provide a useful basis for challenging claims based on personal distress or reputational injury falling outside the protection afforded to the investment.[24]
[1] Emergofin B.V. and Velbay Holdings Ltd. v. Ukraine, ICSID Case No. ARB/16/35, Award, 1 May 2026, ¶ 10; Emergofin, Decision on Jurisdiction, Admissibility and Liability, 1 July 2021, ¶¶ 120, 621.1.
[2] Emergofin, Award, ¶ 4; Emergofin, Decision on Jurisdiction, Admissibility and Liability, ¶¶ 109-110.
[3] B. Sabahi et al., Investor-State Arbitration (2nd edn. 2019), ¶ 1.03.
[4] Emergofin, Decision on Jurisdiction, Admissibility and Liability, ¶¶ 114-121.
[5] Emergofin, Decision, ¶¶ 117, 120.
[6] Emergofin, Decision, ¶ 109.
[7] Emergofin, Decision, ¶¶ 109-110.
[8] Emergofin, Decision, ¶¶ 109-110, 114-117.
[9] Emergofin, Decision, ¶¶ 111-112.
[10] Emergofin, Decision, ¶¶ 111-117.
[11] Emergofin, Decision, ¶¶ 114-117.
[12] Emergofin, Decision, ¶¶ 117, 121.
[13] Emergofin, Award, ¶ 10; Emergofin, Decision, ¶ 621.1.
[14] Emergofin, Decision, ¶ 120.
[15] Emergofin, Decision, ¶ 114.
[16] Emergofin, Decision, ¶¶ 114-117.
[17] Emergofin, Decision, ¶ 117.
[18] Emergofin, Decision, ¶ 118.
[19] Emergofin, Decision, ¶ 119.
[20] Emergofin, Decision, ¶ 121.
[21] Emergofin, Decision, ¶¶ 121, 621.1.
[22] Emergofin, Decision, ¶¶ 117, 120-121.
[23] Emergofin, Decision, ¶¶ 117, 121.
[24] Emergofin, Decision, ¶¶ 114-120.