When the “alter ego” doctrine is applied to enforce a court or arbitration award, a “reverse piercing of the corporate veil” occurs. Whereas in classical corporate law the beneficiary is held liable for the company’s debts, here, conversely, the controlled entity is liable for the debts of the owner (the state). This requires plaintiffs to provide exceptional evidence that the state-owned company acts solely as a structural unit of the state, rather than as an independent entity.

“The ‘alter ego’ doctrine of liability cannot be applied solely on the basis of the company’s formal ownership by the state or isolated signs of commingling of assets and management. At the same time, the burden of proving the circumstances that rebut the presumption of the company’s independence lies with the claimant,” comments KKMP Partner Stanislav Dobsevich.

Despite the high standards of proof, this threshold is quite realistic to overcome.

“The key to success is the claimant’s ability to convincingly demonstrate, in accordance with the requirements of the specific jurisdiction, a close connection between the company and the state,” adds Stanislav.

This was the case in some proceedings between Russian and Ukrainian companies that began after 2022. In July 2022, the Supreme Court of Ukraine authorized the seizure of a stake in the Ukrainian “Prominvestbank” owned by the development corporation “VEB.RF” (Case No. 910/4210/20).

A court in the Netherlands reached a similar conclusion in the case of another Ukrainian company, Avtodorcomplet (Case No. 200.359.385/01). This company attempted to seize the assets of Gazprom International and other foreign subsidiaries of the Gazprom Group that belonged to Gazprom Neft until 2025 (Western Asia, the Dutch companies Gazprom Neft Badra and Gazprom Neft Middle East). The claimant alleged that, allegedly because of them, Avtodorcomplekt lost a granite mining project in the Donetsk region.

In the Netherlands, state-owned companies are recognized as the state’s “alter ego,” but this does not lead to the enforcement of the award due to the operation of immunities. This practice also highlights the downside of this instrument: the “alter ego” doctrine can hinder the enforcement of arbitral awards, since if companies are recognized as “alter egos,” their assets, like those of the state, will be subject to immunity, explains Stanislav Dobshevich.