[Congressional Record Volume 150, Number 58 (Friday, April 30, 2004)]
[Extensions of Remarks]
[Pages E716-E717]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                     CONGRESSIONAL UKRAINIAN CAUCUS

                                 ______
                                 

                           HON. MARCY KAPTUR

                                of ohio

                    in the house of representatives

                         Friday, April 30, 2004

  Ms. KAPTUR. Mr. Speaker, I rise tonight to request that the following 
letter be inserted in the Record.


                               Congressional Ukrainian Caucus,

                                   Washington, DC, March 26, 2004.
     Hon. Viktor Yanukovych,
     Prime Minister of Ukraine.
       Dear Prime Minister Yanukovych: As members of the 
     Congressional Ukrainian Caucus and long time supporters of 
     Ukraine's independence and economic growth, we are writing to 
     express our concern regarding an investment issue that 
     involves U.S. taxpayer funds.
       The Congress established the Western NIS Enterprise Fund 
     (WNISEF) as a private equity fund to invest in small- and 
     medium-sized private enterprises in Ukraine (Moldova and 
     Belarus) in 1994. WNISEF was capitalized initially with $150 
     million by the U.S. Government, with the key aspect of 
     spurring foreign investment in Ukraine. Since its foundation, 
     the Fund has fulfilled its mission as envisioned by Congress, 
     making cumulative investment commitments of more than $73 
     million in 22 companies in Ukraine, as well as $3.8 small 
     business loans to 67 Ukrainian small businesses. The Fund has 
     attracted additional capital to these businesses of well over 
     the amount it has invested itself.
       However, these accomplishments are now at risk of being 
     overshadowed by an investment dispute that threatens 
     Ukraine's foreign investment reputation and U.S.-Ukrainian 
     economic relations.
       WNISEF recently filed an arbitration case against Ukraine 
     arising out of Ukraine's violation of the Fund's rights under 
     the U.S.-Ukraine Bilateral Investment Treaty (BIT). it is a 
     disturbing investment issue implicating the fundamental value 
     of rule of law, contract and treaty obligation enforcement.
       The case involves a WNISEF loan to the Ukrainian company, 
     Sonola JSC (Kirovohrad). After Sonola defaulted on payments 
     of the loan, WNISEF sought to collect the loan and, as in 
     accordance with the dispute settlement language of the loan 
     agreement, filed a claim for arbitration with the American 
     Arbitration Association, New York, USA. The arbitrator, and 
     subsequently the New York courts, upheld WNISEF's claim 
     against Sonola of $3.8 million.
       Unfortunately, WNISEF has been unable to enforce the 
     international arbitration award in Ukraine's courts--twice 
     filing a petition

[[Page E717]]

     for recognition and enforcement of the award to the 
     Kirovohrad Oblast Court of Appeal during 2001-2002. The 
     Supreme Court of Ukraine has refused the Fund's appeal, 
     casting doubts as to the fulfillment by Ukraine of its 
     obligations under international agreements.
       WNISEF has now been forced to file an action against 
     Ukraine to the International Centre for Settlement of 
     Investment Disputes (Washington, D.C.), alleging that the 
     actions of the Ukrainian judiciary have violated 
     international law, including Ukraine's obligations under two 
     important international agreements to which Ukraine is party.
       We would like to ensure that the Fund is treated fairly 
     under the terms of the U.S.-Ukraine Bilateral Investment 
     Treaty. If WNISEF is not provided basic protection under 
     Ukrainian law, how can other potential foreign investors have 
     any confidence in Ukraine's foreign investment climate?
       The Fund has repeatedly expressed its willingness to 
     resolve the dispute by way of negotiations and reaching an 
     amicable agreement. In order to prevent the potential 
     negative effects for Ukraine due to a hearing of this case at 
     the International Centre for Settlement of Investment 
     Disputes, we urge you to facilitate a prompt resolution of 
     this dispute.
       Reducing investor risk and increasing investor confidence 
     are the keys to attracting additional foreign capital to 
     Ukraine, which will in turn create jobs, modernize factories 
     and bring numerous other benefits to the Ukrainian people.
       It is our hope that American companies doing business in 
     Ukraine maintain full confidence in the Ukrainian system and 
     continue to contribute to its economic development. A prompt 
     resolution of the WNISEF investment dispute will enhance U.S. 
     confidence in Ukraine's commitment to foreign investment 
     protection.
           Sincerely,
     Marcy Kaptur,
       Co-Chair.
     Curt Weldon,
       Co-Chair.

                          ____________________