CYIL vol. 14 (2023)

NIKOLA KURKOVÁ KLÍMOVÁ

CYIL 14 (2023)

1. Introduction In February 2023, the EU adopted the tenth package of restrictive measures in response to Russia’s military aggression against Ukraine. 1 In the latest wave of sanctions, the EU newly targeted three Russian financial institutions, imposed additional import and export bans and expanded the sanction list of individuals and entities subject to travel restrictions and asset freezing. In retaliation to the series of restrictive measures, the Russian administration had declared shortly after the outbreak of the armed conflict its intention to take temporary control of businesses from ‘unfriendly countries’ suspending their operation in the Russian market whose foreign ownership exceeded 25%. 2 One year later, the external administrative regime was effectively imposed on two EU companies 3 as President Putin signed a decree paving way for potential confiscation of foreign assets in Russia in the coming months. Alongside traditional means of warfare, coercive economic policies in the form of blocking of bank accounts, limits on bank deposits and withdrawals, payment authorisations, disconnection from the SWIFT system, lifting patent protection or other restrictions on the disposal of property have been used as a critical instrument in rebalancing the powers in the Russia-Ukraine armed conflict. While these measures have not formally deprived targeted individuals and entities of their ownership rights, they severely curtailed the full use and enjoyment of the respective assets. Their effects were particularly noticeable in the interruption of standard economic operations, pushing numerous entrepreneurs into liquidation, 4 yet they also impaired the ability of businesses to claim their rights or defend themselves in courts. With the expansion of sanction regimes in relation to the war in Ukraine across numerous developed economies, these issues have become a major concern also in the field of investment arbitration. On the one hand, targeted foreign investors started looking up at arbitral tribunals as a promising forum for their damages claims against freezing as well as seizure orders that allegedly produced expropriatory effects and violated guarantees of fair and equitable treatment (“FET”) in the relevant international investment agreements (“IIAs”). At the same time, there have been reports of pending arbitral proceedings which became unable to unfold due to the impact of unilateral sanctions. 5 1 Council Regulation (EU) No. 833/2014 of 31 July 2014 concerning restrictive measures in view of Russia’s actions destabilising the situation in Ukraine; Council Regulation (EU) No. 269/2014 of 17 March 2014 concerning restrictive measures in respect of actions undermining or threatening the territorial integrity, sovereignty and independence of Ukraine. 2 State Duma of the Russian Federation, Bill No. 104796-8 of 12 April 2022 on the external administration for the management of an organization. 3 LJUNGGREN, D. (2023). Putin signs decree taking over Russian assets of two foreign firms. Reuters , 26 April 2023, available at: . 4 DE PAOLI, L. and GARCIA PEREZ, I. (2023). Billions of Dollars Behind New Iron Curtain: Investors in Russia navigate sanctions. Bloomberg , 21 February 2023, available at: . 5 For instance, in March 2022, the tribunal in the case Nord Stream 2 administered by the Permanent Court of Arbitration had to vacate a scheduled hearing and suspend the proceedings following a notice by the claimant that it could no longer pursue its claims in arbitration due to the blocking of its bank accounts by the US administration. See Nord Stream 2 AG v. European Union , PCA Case No. 2020-07, Procedural Order No. 7, 16 March 2022, paras. 2 and 6.

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