In an award on jurisdiction and liability published on 25 October 2012, an ICSID tribunal dismissed claims brought by US investors, Bosh International, Inc and B&P Ltd Foreign Investments Enterprise (Bosh International), for breach of the US-Ukraine bilateral investment treaty (BIT). The claims against Ukraine were based on the decision of Taras Shevchenko National University of Kiev (university) to terminate a contract for the re-development and operation of a property belonging to the university (Science-Hotel Complex).

The university terminated the contract following an internal audit conducted by the General Control and Revision Office of the Ukraine Ministry of Finance (CRO), which had concluded that the building was used mainly for commercial purposes, rather than educational purposes as foreseen by the contract. When Bosh International refused to agree to a termination of the contract, the university started proceedings in the Ukrainian courts. Bosh International objected to the jurisdiction of the Ukrainian courts, on the basis that the dispute was an investment dispute within the meaning of the BIT and the ICSID Convention and was, therefore, within the jurisdiction of ICSID.

The Ukrainian courts rejected Bosh International's arguments, confirmed the termination of the contract and ordered the eviction of Bosh International from the Science-Hotel Complex. Bosh International then commenced ICSID arbitration proceedings, claiming that Ukraine had breached its obligations under the BIT, in particular the:

Bosh International argued that the conduct of the CRO, the Ukrainian courts, the Ministry of Justice and the university was attributable to Ukraine either under Article 4 or 5 of the Articles on State Responsibility of the International Law Commission (ILC Articles). Article 4 provides that the conduct of a state organ is attributable to the state. Article 5 relates to how the conduct of persons or entities exercising elements of governmental authority is also to be considered an act of the state.

The tribunal agreed that the CRO, the Ukrainian courts and the Ministry of Justice were organs of the state and that their conduct was, therefore, attributable to Ukraine.

However, the tribunal rejected Bosh International's argument that the university's conduct was attributable to the state. It found that the university was a separate legal entity which could not be considered a "state organ". As regards the question of whether it exercised governmental authority, the tribunal found that, in order for the university's conduct to be attributable to Ukraine, Bosh International would have to establish that the:

The first limb was made out as, even though the university was a separate and autonomous legal entity, it was still empowered to exercise elements of governmental authority in relation to the provision of higher education services and the management of state-owned property. However, in the tribunal's view, the requirement under the second limb was not met, as the university's decision to enter into and subsequently terminate the contract with Bosh International was a private or commercial activity aimed at securing commercial benefits for both parties.

Therefore, Bosh International's allegations in relation to the conduct of the university failed at the attribution stage. The allegations against the CRO, the Ukrainian courts and the Ministry of Justice managed to overcome this hurdle. However, the tribunal rejected Bosh International's argument that the conduct of these state organs amounted to breaches of the BIT.

The tribunal's analysis of the ILC Articles confirms that an investor often has more than just the jurisdiction and admissibility hurdles to overcome before the tribunal will address its claims on the merits. In order to establish liability, the investor must show that the conduct complained of is attributable to the state.

The tribunal's decision also confirms the two limbs of Article 5 of the ILC Articles. The investor must show both that:

Even an entity with a considerable degree of autonomy, such as a university, can be empowered to exercise governmental authority. However, this is not sufficient to qualify any conduct of the university as an exercise of governmental authority and, therefore, attributable to the state. As quoted by the tribunal, James Crawford (in his commentary on the ILC Articles) illustrates this as follows:

Case: Bosh and another v Ukraine (ICSID Case No ARB/08/11).